Budget 2026: Healey steps in to help ailing housing sector

John Healey has promised not to make any more changes to residential building regulations for the duration of this Parliament except those that improve building safety.

Delivering his first Budget as chancellor this afternoon, Healey also pledged to remove biodiversity net gain rules on all brownfield sites smaller than 1.5ha, around the size of two football pitches.

While Healey promised to “draw the line” on repeated changes to building regulations which have stifled housing delivery in recent years, Treasury documents reveal the department will also consider how to “amend regulations where doing so would support development by being more proportionate”. 

The measures came as part of a package of support for the ailing housing sector including £4.7bn of government-backed loans for the Your First Home scheme, which is aiming to help around 70,000 first-time buyers in England and support the delivery of an estimated 20,000 new homes.

Other housing measures include an extra £1.5bn for the government’s social and affordable housing programme (SAHP) and a VAT exemption for all land sold to social housing providers.

Meanwhile, there will also be new planning rules to “encourage” datacentre schemes to meet a set of requirements including minimising water usage, protecting nature, creating local jobs and paying for apprenticeships.

These rules, which have been set out in a new “data centre covenant” will be mandatory for those schemes which are seeking “enhanced government support”.

In a significant boost for devolution, Healey pledged to allow regional leaders to keep 100% of local business rates by the end of this decade, starting with 20% from next year, and new powers to introduce an overnight visitors’ levy from 2028.

The Treasury document said it would support the rollout of Good Growth Funds across England, while also enabling local leaders to ”bring together different funding tools into a single local investment approach and align Public Financial Institutions, pension funds and private capital behind local growth priorities to invest in catalytic regeneration and development”.

Funding of £100m for the local apprenticeship service, first announced in September, has been confirmed for 2027-28 and 2028-29 with the money to be shared among 14 Mayoral Strategic Authorities across England.

The National Wealth Fund and British Business Bank will be handed an additional £20.4bn in funding over the next four years.

Healey said the government will extend the temporary 3.7p-per-litre red diesel duty cut for a further six months, and the proportional reduction in red diesel duty resulting from the 5p cut to the main fuel duty rate. Red diesel duty will then return to its pre-March 2022 rate and be uprated in line with RPI from 1 July 2027.

Healey announced a series of measures aiming to lower energy bills including a pledge to only buy or build renewable energy projects which bring down bills and when they connect to the grid. He is also scrapping a levy to fund hydrogen projects, which will instead be funded directly from government.

The Budget was accompanied by an economic forecast by the Office for Budget Responsibility (OBR), which said inflation is expected to rise to 3.75% early next year before falling to 2% in 2028 as energy prices fall.

The watchdog also expects the Bank of England’s base rate to rise from the current 3.75% to 4.25% by the middle of next year.

The OBR upgraded its forecast for UK economic growth this year to 1.2% and is expecting 1% in 2027, 1.6% in 2028 and 1.8% in 2029.